It is the ultimate gift for children but a nightmare for parents. As the multi-million pound Harry Potter film filled cinemas with awe-struck children yesterday, shoppers were coming across a less magical fact: they will have to pay almost twice as much for the film's merchandise as Americans.

With pre-release screenings filled to capacity this weekend before the film's official debut on Friday, products have already gone on sale in Britain to cash in on the Christmas market at prices called 'outrageous' by consumer groups. A survey of British stores by The Observer has revealed that all Harry Potter products are being sold to British shoppers at grossly inflated prices.

A Harry Potter Action Figure costs £7.99 in Woolworths but just under £5 - including tax - in an American Wal-Mart chain store. At the costlier end of the range, Harry Potter's Levitating Challenge - a game in which children are encouraged to copy their hero's 'magic skills' - costs £39.99 in the UK but £20.50 on walmart.com, Wal-Mart's internet site in the United States.

A comparison of 10 products on sale in the UK with the same goods on sale in America showed an average increase of 42 per cent this side of the Atlantic. Consumer rights experts accept a 25 per cent price difference may occur because of differing tax and business costs in the UK, but criticised the mark-ups.

The Consumers' Association said the inflated prices were 'ludicrous'. 'It is possible to explain a 25 per cent price difference through things like the 17.5 per cent VAT we pay,' said spokesman Phil Evans 'and the 5 to 10 per cent higher business costs of the UK. But for the price to nearly double across the Atlantic is outrageous.

'I would advise consumers to think about ordering from the States. I would check the European websites too. If companies can take the mickey and exploit the vulnerability of kids and parents - the profitability of pester power - it has to be exposed. For every parent, their popularity with their kids is more valuable than the price difference, no matter how ludicrous it is.'

Deborah Toogood, 42, from Cheltenham, was shopping last week for her daughter Camilla, nine, and son Oliver, three. 'Camilla has seen the pictures in the magazines, and is very interested, as is Oliver, and he can only say the words "Harry Potter".' The family have had to book to get good seats for the film in Cheltenham. 'In some ways Harry Potter is a blessing, as it's something you know they'll like. But it is a bit expensive. I wouldn't pay £19 for that,' she said, pointing to a doll of Potter. She expects to spend £50 on Potter merchandise this year.

Other adults had more selfish purposes. Phil Griffin, 19, had come from Southampton to buy the Lego Harry Potter Castle. His enthusiasm for the £80 purchase was equalled by his disappointment at hearing they had already sold out. 'It's for me,' he added.

A source at the buying department of Hamleys said licensed goods like the Harry Potter range - the brand for which is owned by Warner Bros - were often sold to the stores at high prices and that 'the profit margins on a range like this are not that large'. They declined to reveal the trade cost. A spokesperson for Hamleys was not available for comment.

But a Woolworths spokesman said: 'Our Harry Potter prices are determined by a number of factors - distribution costs, taxes and the cost price from our suppliers, to name but a few. A comparison with the United States is not a valid one to make.' Warner Brothers agreed and added that a retail price was recommended to the outlets, who could raise the price if they wanted. 'There are also some taxes in the United States,' added a spokeswoman.

Campaigners were further outraged because most Harry Potter merchandise is made in China. The Chinese government has long been berated because of its record on child labour and workers' rights, with critics arguing that the US has turned a blind eye to human rights abuses in China to hasten it into international free trade agreements and so permit US companies to benefit from cheap Chinese labour.